The state of balance obtained by an end-user of products refers to the number of goods and services they can buy, given their existing level of income and the prevailing level of cost prices. Consumer equilibrium permits a customer to get the most satisfaction possible from their income.
Related link: Theory Of Consumer Behaviour
|(A) Meaning of consumer’s equilibrium||Consumer’s Equilibrium means a state of maximum satisfaction.
A situation where a consumer spends his given income purchasing one or more commodities so that he gets maximum satisfaction and has no urge to change this level of consumption, given the prices of commodities, is known as the consumer’s equilibrium.
(B) Condition of consumer equilibrium in case of a single commodity
|The consumer will be in the state of equilibrium when the following condition is fulfilled:
The marginal utility of commodity X in terms of rupees is equal to the price of commodity X in rupees. [MUx (in ₹) = Px (in ₹)]
Mux (in utils) = Px (in ₹) or MU of Commodity X (in utils) = Px (in
MUm (in utils) MU of Money (₹)(in utils)
|(C) Hypothetical Schedule/ Numerical Example||Let us take the example of a fruit ice cream. The price of an ice cream scoop is ₹30 and MUm, i.e., MU of money (₹1) = 1 util
|(D) Explanation and conclusion||In the given example, the level of consumer’s equilibrium is 3 units.
MU of ice cream in rupees = Price of ice cream in rupees, i.e., ₹30
A consumer consumes the quantity at which MUx = Px to be in the state of equilibrium.
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